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September 07, 2007

Glitner Places Big Bet on Geothermal

Iceland's Glitnir Bank (OMX15: GLB, U.S. citizens cannot buy stock) which opened its first U.S. office in New York September 6, said it plans to invest $1 billion in U.S. geothermal energy projects over the next five years in order to exploit some of the $40 billion market that they predict will develop over the next 25 years.

I recommend saving a copy of this report if you have any interest in renewable energy, as it has extensive charts and graphs on the whole industry, perhaps with a bias toward geothermal, although I find it quite objective. It is quite current with data through May of this year. Although geothermal cannot meet nearly the potential of some other renewable sources, a 10-11% share of renewable technologies is much larger share than expected by some and a very worthwhile resource that is has quite mature technology. This does not include any implementation of enhanced geothermal systems (EGS) which, although not proven, offers the potential to allow the use of geothermal energy over a much wider geographical area.

The report’s main findings:

The U.S. with total installed capacity of some 2,800 MW and annual electricity generation of approximately 16,000 GWh. It will continue to be at the forefront of the world’s geothermal development and currently has projects underway that, when completed, will boost U.S. installed capacity by a further 2,500 MW. Given an overall estimated resource base of up to 30,000 MW for hydrothermal, and an even greater potential for direct use of geothermal energy, the opportunities for the industry are tremendous. These figures do not include any exploitation of hot dry rock or deep geothermal/EGS.

The biggest potential for geothermal energy applications in electricity production is in the Western States, primarily in California, Nevada, Idaho and Oregon. In California, geothermal could provide about 20 percent of today’s electricity needs. In Nevada this could be even 60 percent and 17 percent of the electricity in Idaho could come from geothermal.In Hawaii, the potential of geothermal power is particularly interesting, as it could provide around 30% of the islands’ electricity needs, decreasing the state’s dependence on fossil fuels. Most of the current development is taking place in Nevada and California.

Glitnir estimates the investment requirement to service current projects to be some USD 9.5 billion. A total Investment of USD 16.9 billion will be required to develop available resources over the next 8 years with a further USD 22.5 billion during the following 10 years. We forecast that the total investment needed to develop the resources available is in the region of USD 39.4 billion until 2025.

Sales of geothermal powered electricity could increase from currently USD 1.8 billion to USD 11.0 billion, without taking into consideration the vast opportunities for the development of geothermal direct use applications, e.g. geothermal heat pumps.

The geothermal industry in the U.S. is still very fragmented, consisting of relatively few big companies and many small ones. Some of the smaller companies lack the financial strength to fully develop projects that in many cases could be profitable. Therefore Glitnir believes there will be considerable consolidation in the industry in the next few years.

For successful development of the geothermal industry it will be necessary to increase the capacity of drilling equipment and related human resources. As the industry is recovering from a decline that took place in the late 1980s and is to some degree competing with the oil industry for human resources, it is crucial to train and educate people to work within the sector.

A summary of the advantages of geothermal as claimed by Glitner:

Base-load power (capacity factor)¹

24 hours a day (e.g. wind powered energy requires more than double the installed capacity of geothermal power to supply electricity to the same number of households)

Availability of electricity throughout peak hours

Dispatchable- capable of being shut-down/ turned on if needed

Pollution Prevention

Geothermal power plant emits 35 times less carbon dioxide (CO2) than the average U.S. coal power plant per kilowatt of electricity produced (NREL)

Left, Cost of electricity generation from renewable resources cents per kWh. Note that all prices are for current technology. Solar costs are likely to go down considerably.

The following charts show their assessment of the market share of various energy sources, with geothermal representing 9.4% of renewable energy, which they peg at 2.7% of total energy, excluding large hydroelectric.

Resource estimates for geothermal, with a possible installed capacity of 15,400 MW by 2025, are shown in the chart.

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Comments

A note of clarification re: CO2. The Glitnir report says geothermal emits 35 times less CO2 than coal-fired plants. This statistic refers to geothermal plants that generate power by directly using steam (rarely) or flash some of the geothermal brine to steam (much more common). Plants using binary-cycle technology, which is a closed-loop system that returns the brine to the geothermal resource after extracting the heat with a heat exchanger, release no CO2.

From a 2004 U.S. Department of Energy geothermal primer, the average CO2 emission from flash plants is 60 pounds per megawatt-hour. For “new” coal and gas plants built since 2002, it lists 2,069 lbs/MWh for coal, and 850 lbs/MWh for combined-cycle natural gas. The coal-to-geothermal ratio is 34.5, or about 35. (A pdf of the primer may be found here, and the emissions portion with hard-to-read charts can be found here.)

Plus - though its outside the scope of this article - geothermal heating and cooling on individual homes/businesses can help vastly reduce the demand for energy - whether its heating oil in the Northeast, electricity for AC throughout much of the country, or even natural gas. I'm not sure how much crossover there is between the two technologies, but I can only hope that more investment in one technology will lead to improvements that will generally make the other more accessible.

It is great to see this investment being made in a clean energy source. However, I think they had to dig to find a chart showing geothermal costs less per kwh than hydroelectric. I guess they are only considereing "small" hydro sources here. They also conveniently ommited nuclear which is cleaner and cheaper. This report looks a little biased. Still it is good to see geothermal is getting a large investment.

Gee, I thought geothermal was rather clean. I suppose if the process releases steam from underground reservoirs it carries elements into the air. I searched for more information about this specific process but found little. Perhaps the best attribute is it does not use fossil fuel even though it adds CO2 and other elements “pollutants” to the atmosphere.

I'm glad to see that somebody is finally going to put up the money to really put geothermal on the map. The latest US energy budget reduces spending on geothermal to zero! Ormat (ORA) is an experienced, profitable company with a market cap of $1.5 billion but they are very conservative. They pay as they go and even pay a dividend. Somebody needs to get aggressive and start spending some real money on this promising technology. It is reliable, clean and has no fuel costs.

Johnbo, most are for renewable energy because they are against coal or nukes while the environment impact of renewable energy. Hot water from deep in the earth is going to carry all the dissolved minerals. It is a huge leap to consider CO2 a pollutant. Start a list of things that are bad for people or the environment, then list the impact.

"It is a huge leap to consider CO2 a pollutant. "
Yeah right. And the arctic ice isn't at record low levels....

But he is correct that most renewable supporters don't like Nuclear -Or even Carbon-Capture and Storage. The later is estimated to add $.03KWhr to the cost of coal derived energy (but we haven't tried to do it on a large enough scale to have that pinned down). So Kit if you want to boost coal, just take Coal plus CCS, as a baseline cost to compare against renewables, I don't think the economics will be too unfavorable for keeping old King Coal in the mix.

From a climatologist's perspective any zero or low CO2 emmisions method, whether it be solar, wind, wave, geothermal, nuclear, or CCS is very nearly equal. I hope we can develop all of them.

Nicely put bigTom for a climatologist’s point of view, however you left out hydroelectric. From an energy efficiency viewpoint hydroelectric and nuclear are the winners. Each of these pays back 50 or more times the energy required to build and maintain them over their life. I believe we green folks should support all of them. JohnBo

The most irritating thing about environmentalists is their collective ignorance of the environment. And no, artic ice is not at record low levels. It is however a huge leap of logic to blame CO2.

Many environmentalists like to put insignificant environmental impacts like climate change, radiation, PCBs, and mercury at the top of their lists.

It Glitnir hired me to do ‘due diligence’ on a geothermal plant, I would want to know how the plant is handling ground and surface water contamination, arsenic as an industrial safety issue, and piping corrosion as an economic issue.

My list starts with real environmental impacts. If the project can economically produce electricity while protecting the environment then start the PR campaign that discusses air emissions.

I think the bankers at Glitnir are in for a rude awakening. Just because geothermal is environmentally friendly in Iceland does not mean the US NIMBYs will not try to stop projects.

Kit and I disagree on climate, but we do agree that geothermal is a good energy source. And yes the NIMBY stuff often stops some good projects. Too often environmentalists see only the local impacts, ignoring the global impact of having another less clean energy source being built elsewhere to take up the demand not satisfied by the local project.

JohnBo: I meant to have hydro on the list. Now large scale hydro can have some serious impacts due to the flooding of land, and methane emmisions from decaying drowned vegetation. Large scale hydro, may actually liberate more GreenHouse gases (mainly Methane) than it displaces. Of course knocking down existing dams is different, we have already paid for their environmental cost, and it would usually be best to continue producing power.

Incidentally quibbling about the few percent (of Coal) carbon emmisions of these alternatives is really pretty silly. In the worst case the small amounts liberated could be handled by free-air capture without hugely impacting the cost.

Hi bigTom,
I have no evidence but intuitively it would seem that methane release from man made lakes would be minuscule compared to all other natural bodies of water. This seems like a poor argument for not making more power-producing dams. JohnBo

I appreciate Kit P's admirably skeptical concern with material performance (dissolved mineral emissions, piping corrosion, etc.) of geothermal power plants. As it happens, most geothermal plants (the binary and flash ones) do pretty well on the dissolved mineral handling score, since the resource fluids containing the dissolved minerals are nearly all injected back into the ground, typically into the periphery of the formation they arose from, minus some heat and, in the case of flash plants, the fraction of water that is "boiled off" in separation. Dry steam and geothermal plants typically emit water vapor and varying fractions of noncondensable gases such as CO2, CO and H2S. Piping corrosion and scaling are generally handled in fairly pedestrian ways. There are some few areas that pose interesting exceptions to typical practice sketched above – areas where the brine is exceptionally rich in dissolved stuff: silica and some metals. These operations can yield some thought-provoking waste products that would rightly pique Kit P's interest. But in the U.S., these tend to be anemable to standard industrial and environmental practices.

Kit P, you make a fine point, and I thank you for your rigor in looking at performance rather than fashion. I am a partisan of geothermal, so I'll gently urge you to consider that most geothermal plants don't end up with masses of precipitates on the surface. That's kind of a rare situation, so maybe a quantitative lookover of a bunch of different plants and processes would temper your conclusion. That would be an interesting paper. I also suspect that there is some growing maturity (and more solid capitalization) in the geothermal industry in the past decade that has resulted in better housekeeping practices incorporated in new plants. New plants I've seen look pretty tight. That wasn't always so, I blush to admit. I will now STF up. Thanks for your thoughts.

Marshall, I completely agree and I too am a partisan of geothermal. Making electricity is a dirty dangerous job and it takes good design and operation to deliver a product safely with minimal environmental impact.

My 'dirty' geothermal data point comes from one of the worst managed utilities in the US. One of the places that no one claimed to eat off the floor.